7 Strategies to Simplify Tax Season for Your Small Business
CoAdvantage- Taxes are a perennial headache for small businesses. In fact, taxes of all sorts – federal, state, property – rank high on the list of small business problems, according to the most recent National Federation of Independent Business Small Business Problems & Priorities report. Employers cite taxes as a key challenge, with increasing tax complexity and unreasonable regulations (including mandated paperwork, dealing directly with taxing authorities, and similar) consistently over-burdening small business owners.
What can you do to make taxes easier to manage? Here are seven ways to make taxes easier on your business.
1: Make sure you’re using the right business structure
Especially for smaller businesses, the differences between sole proprietorships, LLCs, S Corporations, and C Corporations can make a big difference in both tax liability and tax complexity.
2: Keep up to date with quarterly estimated taxes
To avoid penalties, make sure you either pay 100% of last year’s tax liability or 90% of this year’s tax (though these percentages can vary depending on business earnings). To keep up with deadlines, set calendar reminders so you never miss a payment or outsource this task to your accountant, PEO, or other partner.
3: Keep with up tax changes
Taxes are an area where it pays dividends to get help. Whether you use an accounting service, something like a Professional Employer Organizer (which can handle employment related taxes on your behalf), or some combination, using dedicated experts means you don’t have to worry about ever falling afoul of some change in the tax code or tax requirements.
4: Keep financial records (and record-keeping systems) up to date
Putting accounting and financial management tasks off until they’re actually due is a recipe for problems. Stay on top of accounting tasks at all times.
5: Take advantage of any available tax breaks, deductions, and write-offs
Don’t waste opportunities to reduce your tax burden! Note, however, that this tip requires following the previous two tips as well, because these kinds of tax opportunities can change over time and usually require good documentation.
6: Watch out for tax scams and misinformation
Make sure you source your tax-related guidance from reputable, credible sources. Those social media “hacks” to improve your tax situation may not apply to your situation or may not even be real. Similarly, businesses can find themselves facing surprisingly sophisticated criminal scams.
7: Classify workers correctly
Classifying workers as either employees or contracts has big tax implications. As a result, it’s a frequent area of tax fraud. But it can also be surprisingly difficult to figure out if the appropriate classification for a given worker, so errors are common too. Read IRS guidance on the subject here.
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about CoAdvantage’s ability to create a strategic HR function in your business that drives business growth potential, contact us today.